Capital Requirement Regulation

the European Union regulation that applies to all EU banks and sets out the rules and formulae that determine the minimum amount of capital that any bank is required by law to hold. It is abbreviated CRR. The CRR is extremely long and extremely complex. Its main impact on securitisation is

  • (a) that it sets the calculations necessary to determine how much capital an EU bank must hold against any securitisation it owns,
  • (b) it sets the rules for when a securitisation can be held in an EU bank’s liquidity coverage ratio pool and
  • (c) it sets out the rules that are applied to determine when the credit risk of an asset has been removed from the an EU bank’s balance sheets for the purposes of calculating that bank’s minimum capital – the SRT rules.

Notwithstanding its length, the CRR itself only sets out the high-level rules. To determine the actual detailed rules applicable to EU banks, one also needs to consult the EBA guidelines applicable to its various rules. Broadly, the CRR is the European Union’s translation into law (with modifications) of the Basel Rules. Technical Note The CRR was first passed in 2013 but has been amended a number of times since.

The technical title of the CRR is Regulation (EU) No 575.2013 of the European Parliament and the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

Although, since the United Kingdom’s departure from the European Union, the CRR is technically no longer applicable in the UK, as part of the on-shoring of almost all EU legislation into British law, almost all the CRR continues to apply to UK banks.

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